Squad's Balance Sheet and Income Statment

[kimiko]

As Kerbalstuff (KS) has shut down, there was a "fun fact" at the end of the shut-down notice, stating that the sales figures of KSP is estimated to be about 1 million copies, though actual figures are seemingly withheld. To me this would seem like a small sarcastic jab to Squad as such a figure would indicate that Squad is (relatively) loaded with money, but cannot contribute to keeping KS alive. So now I'm starting to wonder is it really the case?
 

As I understand it (correct me if I'm wrong), Squad has only a handful of developers hired, a few managerial positions (marketing, finance, accounting etc.), a few external developers (whom I suspect are not permanently hired on limited contracts) and a few forum moderators. I would assume there is an office (fully equipped with hardware, software and normal "office"-facilities) which would account for a certain amount of assets and renting expenses. As for other expenses, they would probably subscribe to various hosting services, Curse, software licences, Unity, various other licences (such as music etc.) etc. They probably also pay royalty fees, not to mention Steam claims a certain amount.

 

All this considered (plus other things I haven't mentioned that which has an associated cost), it is normal to assume that the majority of the expenses in the(any) balance sheet is tied to the human resource compensation, which in this case is relatively small. Marketing costs should be low considering it's only available in two (online) outlets, and advertisements are seemingly few. As far as I know Squad does not seem to be tied to any investors or publishers, at least not venture-capitalist investors (perhaps an angel investor?), or else there would defiantly be a lot more speed on the development cycles and more staff hiring. Perhaps a bank loan would account for a certain amount of liabilities with connected expenses. Also, Squad does not seem to have public stocks.

 

So, for 40 USD (though less before) * 1 million copies, a relative small company, with (seemingly) little marketing, no (aggressive) investors and no public shareholders, it would seem like a pretty overflowing income statement.

 

If these assumptions are accurate, why does it seem like KSP development is running on tea and biscuits? With very little focus on growth and market-share.

Or am I totally off?

Edited February 16, 2016 by kimiko
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[sardia]

First question is, did it always sell at 40$? Are you counting discounted sales? Second question, why does it matter? Minecraft, for example had a really small team, sold 20x what KSP is supposedly sold. It's run like it's a 1 man show. I for one would consider it partial incentive for ongoing development/ additional content for free.* The team doesn't really have an obligation beyond normal to devote every last penny to this game. They could move onto other projects that will generate a new revenue stream, honestly they kinda should go for an expansion or something once sales has tapered off in a few years to get the community growing again. 

 

*I think KSP gets a chunk of the pay from mods, so ongoing development does have monetary benefits.

[kimiko]

1 hour ago, sardia said:

First question is, did it always sell at 40$? Are you counting discounted sales? Second question, why does it matter? Minecraft, for example had a really small team, sold 20x what KSP is supposedly sold. It's run like it's a 1 man show. I for one would consider it partial incentive for ongoing development/ additional content for free.* The team doesn't really have an obligation beyond normal to devote every last penny to this game. They could move onto other projects that will generate a new revenue stream, honestly they kinda should go for an expansion or something once sales has tapered off in a few years to get the community growing again. 

 

*I think KSP gets a chunk of the pay from mods, so ongoing development does have monetary benefits.

It was cheaper before, as I indicated. I did buy it cheaper long before the beta. And I have no idea what the discounted sales account for. Despite not taking into account price variations, it's should be reasonable to assume (if you trust Steam and Squad to have some grip of their own economy), that there is a substantial income compared to their assets, I.e. high profitability.

The thing that strikes me (and somewhat worries me), as you said, is that it's run like a one man show. However in contrast to Minecraft, MC had a lot faster development cycles and a considerably lower adoption threshold, which arguably led to way higher growth rate as because of the WoM-effect.

Without growth a company will eventually stagnate, which would mean the end for KSP. So, considering KSP have yet to include an "up-to-date" game engine, and is still lacking a lot of content that was intended to be there, it surprises me that Squad haven't taken noticeable steps to increase growth despite seemingly having potential investment capital to do so. I remember Minecraft was quite quick to reinvest as soon as there was growth potential. I even remember seeing pictures of the company growing from one man's apartment, into a continuously expanding studio, into what it is today. During that period you could even see the dates between updates getting shorter and shorter.

That being said, due to the complex nature of KSP's gameplay, it will always have a handicap compared to other games. However there are other steps that can be taken to increase market share and stimulate growth regardless, but I don't see it yet (at least not in the blog).

 

The point I'm trying to make out, is that if it's really the case that they have a ton of money, where does it go? Not into development it would seem... And with today's economic climate, reinvesting should defiantly be more encouraged than saving.

 

(not sure I understand what you mean by mods, but I make and maintain some mods, and I neither pay or get paid)

Edited February 16, 2016 by kimiko
language

[m4v]

Whatever figure you can come with will be wrong, you're forgetting those times that KSP was sold dirt cheap and people bough copies for even their dogs.

1 hour ago, kimiko said:

As Kerbalstuff (KS) has shut down, there was a "fun fact" at the end of the shut-down notice, stating that the sales figures of KSP is estimated to be about 1 million copies, though actual figures are seemingly withheld. To me this would seem like a small sarcastic jab to Squad as such a figure would indicate that Squad is (relatively) loaded with money, but cannot contribute to keeping KS alive. So now I'm starting to wonder is it really the case?

I wonder what was the point of that raising that "fun fact" that when it was said that money wasn't an factor in closing KS.

[Hary R]

Well as a finance specialist (that's my job), i will say that those figures are not that impressive, it's 1 000 000 copies over the course of 3 years with an average price of 20$ (promotion and early access price were way lower) a dev cost 30 000$ per year, managerial team will coast 600 000 to 1 00 000 $ per year (that include business travel, meeting, conference etc).  Unity, the office, the web site,the forum, taxes etc will take least 30% of the income. Have to say for an indy game dev company, it's a pretty good figure but they are far from being loaded with money, and they still give those million buyer free update... 

(don't ask me to make calculation, it's not needed)

[Merinsan]

I'm not sure why you're even bringing up Squads finances. Kerbal Stuff was not supported by Squad because it wasn't the official mod site, Curse is and this was made clear by Squad right up front.

Apart from that, we know nothing about how much money Squad has, and honestly it's not our business.

As a side note, the guy that was running Kerbal Stuff clearly had no idea how to run a business, which is why it's closing down. Offering a free service without advertising is a good way to ensure its eventual death. Even charities make enough money to cover costs.

[kimiko]

7 minutes ago, Hary R said:

Well as a finance specialist (that's my job), i will say that those figures are not that impressive, it's 1 000 000 copies over the course of 3 years with an average price of 20$ (promotion and early access price were way lower) a dev cost 30 000$ per year, managerial team will coast 600 000 to 1 00 000 $ per year (that include business travel, meeting, conference etc).  Unity, the office, the web site,the forum, taxes etc will take least 30% of the income. Have to say for an indy game dev company, it's a pretty good figure but they are far from being loaded with money, and they still give those million buyer free update... 

(don't ask me to make calculation, it's not needed)

I'd say that's a reasonable assessment, although I'd think the managerial team would probably be a bit cheaper and smaller, since it's indy. Even so, with that sort of money, one could easily attract an investment bank, and start expanding. Of course, at some point you'd probably not be indy anymore...

Regardless, I'd think that the seeming profitability rate doesn't exactly reflect the development speed, or at least what could have been if certain investments in both marketing and development were done (assuming it was somewhat successful investments). What do you think?

[kimiko]

18 minutes ago, Merinsan said:

I'm not sure why you're even bringing up Squads finances. Kerbal Stuff was not supported by Squad because it wasn't the official mod site, Curse is and this was made clear by Squad right up front.

Apart from that, we know nothing about how much money Squad has, and honestly it's not our business.

As a side note, the guy that was running Kerbal Stuff clearly had no idea how to run a business, which is why it's closing down. Offering a free service without advertising is a good way to ensure its eventual death. Even charities make enough money to cover costs.

I'm not concerning myself over the whole kerbalstuff vs. curse issue, that's another thread. I'm interested in the future of KSP.

And, honestly, it is indeed our business. We, who play the game, are as much stakeholders as anyone else.

[razark]

We're not investors in the company, we're customers.  We are entitled to exactly whatever the state of the game was when we made our purchase.  Anything beyond that is extra, and we have no right to expect a single bit more.

[Hary R]

30 minutes ago, kimiko said:

I'd say that's a reasonable assessment, although I'd think the managerial team would probably be a bit cheaper and smaller, since it's indy. Even so, with that sort of money, one could easily attract an investment bank, and start expanding. Of course, at some point you'd probably not be indy anymore...

Regardless, I'd think that the seeming profitability rate doesn't exactly reflect the development speed, or at least what could have been if certain investments in both marketing and development were done (assuming it was somewhat successful investments). What do you think?

yeah managerial expense depend on a lot of thing (who know how much the CEO is paid) I will say my 600 000$ is reasonable.

I'm sure Squad is backed by some bank, i'ts a business, not a one man adventure into the unknown, and for what i can take from devnote, the producer team is certainly looking for more investors/business partner. No worry about immediate future for them.

25 minutes ago, kimiko said:

I'm not concerning myself over the whole kerbalstuff vs. curse issue, that's another thread. I'm interested in the future of KSP.

And, honestly, it is indeed our business. We, who play the game, are as much stakeholders as anyone else.

well no, we aren't, we have bought the game at one point. The future of Squad is not our concern after that (it is only because we like the game) a real stakeholder is more concerned about hi investment, the income it will give him. A buyer don't take the same risk. all the up date Squad gived us are bonuses. 

Edited February 16, 2016 by Hary R

[Merinsan]

16 minutes ago, kimiko said:

I'm not concerning myself over the whole kerbalstuff vs. curse issue, that's another thread. I'm interested in the future of KSP.

And, honestly, it is indeed our business. We, who play the game, are as much stakeholders as anyone else.

We are not stakeholders. While that may have been true to some extent in Alpha and Beta, as of version 1.0 the game is finished.

Now I'd certainly be disappointed if Squad closed down today, as I couldn't get 1.1, I'd certainly have no right to complain about it. Just like I would be disappointed in Burger King closed down today, and I could no longer buy a Whopper. I see no reason to suspect either of those things is going to happen in the near to mid term.

[Bloody_looser]

43 minutes ago, Merinsan said:

Now I'd certainly be disappointed if Squad closed down today, as I couldn't get 1.1, I'd certainly have no right to complain about it. Just like I would be disappointed in Burger King closed down today, and I could no longer buy a Whopper. I see no reason to suspect either of those things is going to happen in the near to mid term.

Squad closing down would be way more disappointing. If BK closed down, there'd still be Wendy's.

 

P.S. Back on the topic. The whole thread is kinda pointless IMO.

[Hary R]

4 minutes ago, Bloody_looser said:

Squad closing down would be way more disappointing. If BK closed down, there'd still be Wendy's.

 

P.S. Back on the topic. The whole thread is kinda pointless IMO.

Indeed it is (for us who play the game at least).

[KerbMav]

2 hours ago, kimiko said:

Without growth a company will eventually stagnate, which would mean the end for KSP. So, considering KSP have yet to include an "up-to-date" game engine, and is still lacking a lot of content that was intended to be there, it surprises me that Squad haven't taken noticeable steps to increase growth despite seemingly having potential investment capital to do so. I remember Minecraft was quite quick to reinvest as soon as there was growth potential. I even remember seeing pictures of the company growing from one man's apartment, into a continuously expanding studio, into what it is today. During that period you could even see the dates between updates getting shorter and shorter.

That being said, due to the complex nature of KSP's gameplay, it will always have a handicap compared to other games. However there are other steps that can be taken to increase market share and stimulate growth regardless, but I don't see it yet (at least not in the blog).

The point I'm trying to make out, is that if it's really the case that they have a ton of money, where does it go? Not into development it would seem... And with today's economic climate, reinvesting should defiantly be more encouraged than saving.

Regardless what the so called experts keep telling us, growth is not everything and certainly not the all holy goal of everything. If a company stagnates, the only thing that is happening is, that it is able to pay its employees and keep in business. Constant increase in turnovers and profits are only relevant when dealing with investors and/or shareholders, who are the only ones interested in an ever growing anything, because they are the only ones really profitting from it. Stagnation means you are doing fine, you are surviving, it is not a bad thing.

Squad has not made any statement regarding future projects or investments - and they will not, ever - for several reasons. Foremost they do not have to involve the public in their business, not least because they are independent, which means that they are free in their own decisions, without any obligation of justification to anyone.
Also the forums would burn once more if they announced to be working on anything else than completing the next 99 versions of KSP.

The team has been fluctuating, but they also kept hiring new people. Unity is bound to stay, switching to a completely different engine would basically mean making KSP 2 - which would require more than fancy new graphics and a higher part count to make current players buy another title.

KSP is being ported to other platforms, merchandise deals are signed left and right ... what kind of bigger, higher, faster expansion are you expecting anyway?

[Overland]

Or theyd rather pour resources into thier game to make it steam workshop compatable rather than prop up a mod... A good mod granted..but some good mods get made stock as we all know.. Most dont

Spaceport went..kerbalstuff wasnt supported..the later being a good sign squad has thier own ideas on the horizon

 

Carving up thier income and lack of action to support a mod as a stab at the community is a bit of a mild insult to good people that gave us...what we too increasingly take for granted

Most of us brought KSP once maybe twice..years ago.. Its been a good ride for most.

Let it remain so

Theres many great mods that almost became fabric of KSP for a large playerbase.. Only a few become stock

 

Kerbalstuff didnt ..

Thats all

Edited February 16, 2016 by Overland

[Streetwind]

1 hour ago, razark said:

We're not investors in the company, we're customers.  We are entitled to exactly whatever the state of the game was when we made our purchase.  Anything beyond that is extra, and we have no right to expect a single bit more.

That's only 95% correct...

Squad has officially committed to continued development of KSP. That means that a purchase of the game can be seen as having been made with that committment factored in. As such: yes, we are entitled to some vague form of future development post-purchase.

Of course, that commitment is already fulfilled for most of the customerbase, since technically, even one free update post-purchase easily fulfills this promise.

The one thing we're really entilted to at this point is the release of "a version 1.1", largely regardless of what that version contains, since people who purchased KSP after the release of 1.0.5 have not yet had their promised "future development" provided. And if Squad maintains their committment after releasing 1.1, then we're entitled to a further version beyond 1.1 too (though again, not to any specific content in that version), because of people who purchase the game post-1.1. And so on, and so forth. Until Squad steps back from that official committment and finishes the final version update that was promised.

[Superfluous J]

22 minutes ago, Streetwind said:

That's only 95% correct...

Squad has officially committed to continued development of KSP. That means that a purchase of the game can be seen as having been made with that committment factored in. As such: yes, we are entitled to some vague form of future development post-purchase.

Granted I bought KSP a billion years ago, but I distinctly remember being warned that Squad had ZERO responsibility to update the game EVER. Assuming new copies of the game being sold still have that warning, then no, nobody is entitled to anything other than the delivery of a working copy of 1.0.5 when they purchase the game.

[p1t1o]

22 minutes ago, Streetwind said:

...since people who purchased KSP after the release of 1.0.5 have not yet had their promised "future development" provided...

I disagree, any update after v.1.0.0 counts as "future development". Otherwise, you could pick v.1.9.8 in 5 years on a Steam sale and complain, "Where is my future development"?

 

ASf ar as I am concerned, commitment to future deeds or not, Squad have more than fulfilled any baseline obligations and have gone above and beyond in many areas already, so anything else is just cake. Have yet to see a really legitimate complaint against them TBH.

 

Hopefully a 64bit cake

[Streetwind]

43 minutes ago, 5thHorseman said:

Granted I bought KSP a billion years ago, but I distinctly remember being warned that Squad had ZERO responsibility to update the game EVER. Assuming new copies of the game being sold still have that warning, then no, nobody is entitled to anything other than the delivery of a working copy of 1.0.5 when they purchase the game.

It's possible that things changed over time? I mean, I can't compare my experiences, since I received KSP as a gift...

All I know is that Squad repeatedly and officially stated both before and after v1.0 that KSP will continue to be developed until further notice. They can of course say "okay it is enough now" anytime they like, but so far they haven't.

Edited February 16, 2016 by Streetwind

[severedsolo]

7 minutes ago, Streetwind said:

It's possible that things changed over time? I mean, I can't compare my experiences, since I received KSP as a gift...

All I know is that Squad repeatedly and officially stated both before and after v1.0 that KSP will continue to be developed until further notice. They can of course say "okay it is enough now" anytime they like, but so far they haven't.

That doesn't mean we are entitled to 1.1, Squad could close up shop tomorrow and say "that's your lot". All that means is that they plan to make further updates. As the recent closure of KS shows, sometimes plans change.

Note; I'm not saying that it's going to happen, but we are really not entitled to anything other than what we have.

[KasperVld]

Hey there!

Unfortunately I'm going to close this thread down. Squad's financial position is not something we discuss in public because it's simply (as @Merinsan so eloquently put it) none of your business. Rest assured that we're financially healthy, and the recent hirings of new developers and a handful of paid QA testers should attest to that. Could we have helped KerbalStuff financially? Perhaps, if we were given notice and/or if we had been asked for help, but that didn't happen. I left a post yesterday with more reasons why it probably wouldn't have happened.

I'm not sure why Sircmpwn felt it was necesssary to publish the 1 million number, it doesn't at all contribute to his reasoning of why KS was shut down. The source of the number is the Steamspy website, which uses statistics to approximate the number of copies a game has sold. SteamSpy has, by our request, removed their indexing of Kerbal Space Program on the website. That request was well-argumented, as the website's manager will tell you.

Anyway, thead locked.

 

edit: I would like to stress that Sircmpwn indicated to me that financial concerns were not the reason why KS was shut down.